Earnings This Week: Tesla, Netflix and Bank of America

Earnings Calendar: July 17 – 21

Earnings season gets into full swing this week. US banks will grab the headlines early in the week with Bank of America, Morgan Stanley, Goldman Sachs, Charles Schwab, Bank of NY Mellon and a string of smaller players due to report. We also have results out from electric vehicle maker Tesla, streaming giant Netflix, chipmaker IBM, Taiwanese firm TSMC, pharmaceutical giant J&J as well as American Airlines and United Airlines.

The UK calendar is also busy with updates due out from online grocer and automation firm Ocado, airline easyJet, energy supplier SSE, Royal Mail owner International Distribution Systems, defence outfit Babcock International and homeware retailer Dunelm.

Below is a calendar outlining all the key earnings to watch out for this week:

Bank of America stock: Q2 earnings preview

We have already had results out from some of the biggest banks in the US, with JPMorgan and Wells Fargo both lifting expectations as they reap rewards from rising interest rates and applauded the strength of the US economy. We now look to see if Bank of America, which has underperformed this year, will follow. Bank of America is expected to report a 17% rise in adjusted EPS in the second quarter to $0.85. That would be a much slower rate than we have seen at other banks, partly because Bank of America doesn’t benefit as much from higher rates compared to the likes of Wells Fargo. However, the strong results out thus far does open the door for a potential beat. Bank of America could deliver slower loan growth than its rivals and deposits continue to flow out of the entire industry. Investment banking remains challenging and income from trading will also struggle to grow, but this would be better than its rivals. Provisions are growing as recession risks still linger, and Bank of America is forecast to put aside $1.2 billion in the second quarter.

Morgan Stanley and Goldman Sachs stock: Q2 earnings preview

Morgan Stanley and Goldman Sachs differ from their rivals as they do not reap as many rewards from higher interest rates and are more focused on trading, investment banking and wealth management. Investment banking continues to be plagued by a lack of dealmaking, IPOs and fundraisings. Their trading arms dealing in fixed-income and equities are also struggling. Morgan Stanley is forecast to report a 1.2% year-on-year drop in adjusted EPS to $1.42, while Goldman Sachs is expected to suffer a much sharper decline of 26% to $5.72. Morgan Stanley is set to suffer a milder decline in earnings than Goldman Sachs because its investment banking division is forecast to be more resilient and because its wealth management arm should also help soften the blow. Understandably, both of them have underperformed their traditional banking rivals this year.

Tesla stock: Q2 earnings preview

Tesla has already revealed that it delivered over 466,000 vehicles in the second quarter, marking a new quarterly record! The series of price cuts and other incentives such as rebates appear to have kept demand on the right trajectory, and markets believe deliveries will keep growing in the second half. But the number one question this week is how has Tesla’s profitability been impacted? Tesla has already said it is willing to sacrifice some of its market-leading margins to support growth and profitability has already been eroded since peaking just over a year ago. Markets think its gross margin will hit its lowest level since the start of the pandemic in the second quarter, while its operating margin is forecast to sink to a two-year low. However, Wall Street thinks this will be the trough for margins. Rising deliveries and a recovery in margins bodes well for the second half of 2023 if Tesla can meet expectations. Tesla shares have risen 2.5-fold since the start of 2023, making it the third best performer in the both the Nasdaq 100 and the S&P 500. There are signs momentum is waning, so Tesla may need to impress this week if it wants the rally to continue in the near-term. You can find out everything you need to know in our Tesla Q2 Earnings Preview.

Netflix stock: Q2 earnings preview

Netflix has rallied over 48% since the start of the year as the streaming giant regains the confidence of the markets with its plan to revive growth and improve profitability through its crackdown on password sharing and its new ad-supported tier. Netflix’s subscriber growth is back on the right path following the ups and downs we saw in 2022. It is expected to have added 1.8 million net new subscribers during the second quarter. What investors will want to know is how many additions are stemming from its new strategy. The crackdown on password sharing, underpinned by stricter procedures to contain accounts to one household and encouraging those piggy-backing to sign-up through a new paid sharing option, is likely to be a bigger driver in the near-term because it has a more immediate impact. Netflix delayed the bulk of the rollout to the second quarter but it is now live in over 100 countries, so this will be the first update on what the initial effect has been. It has already warned that some of the boost provided from password sharing will be pushed into the third quarter because of the delay. The fact Netflix has two substantial new catalysts to help keep subscriber numbers climbing to new record highs suggests there is an opportunity for a beat this quarter. On the other hand, a miss would suggest the new plan isn’t taking-off as quick as markets have been banking on this year.Revenue and subscriber growth are both set to accelerate in the second half and profitability is improving. All of that has the potential to keep providing Netflix shares with momentum, but only if it can keep up with market expectations. You can find out everything you need to know in our Netflix Q2 Earnings Preview.

IBM stock: Q2 earnings preview

Wall Street forecasts IBM’s revenue will come in flat from last year at $15.5 billion in the second quarter. Consulting and software are growing, but being countered by ongoing weakness in demand for infrastructure hardware. Still, IBM is suffering from a broader slowdown in demand for mainframes and is being hit as companies pullback or delay spending on big IT projects. Red Hat will continue to shine, but it is not immune to the brakes coming down on the topline. Adjusted EPS is expected to drop over 13% to $2.00 as costs continue to rise and revenue stagnates. We should get more insight into its deal announced last month to buy Apptio.

TSMC stock: Q2 earnings preview

Taiwan Semiconductor Manufacturing Co, better known as TSMC, has reliably grown revenue and earnings at an impressive rate over recent years but the tide is expected to turn in the second quarter. TSMC has already announced that second quarter revenue fell around 10%, so the onus will be on earnings. Adjusted EPS is expected to come in at NT6.67, which would be down 27% from the year before. Wall Street is looking for a gross margin of 53.2% and an operating margin of 41.0%. Investors will hope that new demand for artificial intelligence can help counter the anticipated fall in earnings and provide a new catalyst going forward. Commentary on its expansion will also be influential as it aims to begin producing in the US next year. The stock is currently at a one-month high.

United Airlines and American Airlines stock: Q2 earnings preview

American Airlines and United Airlines have both risen in the wake of results out from rival Delta Air Lines, which revealed it is firing on all cylinders as it reported record revenue and profits as the recovery from the pandemic continues. Domestic demand remains resilient and international travel is making a big comeback. Investors will hope other airlines will follow. American Airlines is forecast to report a 2.2% rise in revenue to $13.7 billion. While tepid, that would mark a new quarterly record and adjusted EPS is expected to more than double from last year to $1.58. United Airlines is expected to report a 14.7% rise in revenue to $13.9 billion and see adjusted EPS jump to $4.0 from just $1.43 the year before, which would also mark fresh records. That suggests United Airlines will be the stronger of the two this season, although both are up around 42% to 44% year-to-date and set to have a bumper year in 2023.

Ocado share price: H1 earnings preview

Confidence in Ocado has been shaken this year as investors run out of patience with losses, heightening pressure on the company to escape the red. Revenue is forecast to rise 9.8% from last year to £1.385 billion, with sales from its retail venture with Marks & Spencer forecast to be up 3.3%. However, investors are more likely to be disheartened if estimates that its adjusted Ebitda loss will swell to £25.1 million from the £13.6 million loss we saw last year play out. Its need to keep investing in its automation technology business and hiking marketing budgets will see it continue to burn through cash, with net debt also on the rise. Look out for any changes to the outlook, with Ocado aiming to deliver mid-single digit annual revenue growth and ‘marginally positive Ebitda’ that will need to be recouped in the second half.